Concern over Emirates-Qantas deal, but BA to stay

British Airways has committed to the London-Sydney route amid concerns the Qantas-Emirates alliance would drive it out of the Australian market.

If approved, the deal between Qantas and Emirates will bring an end to the long-standing tie-up between British Airways and Qantas.

In a submission to the Australian Competition and Consumer Commission, BA says it is increasingly hard to operate flights between the UK and Australia without an alliance.

"This is particularly the case for end of line carriers such as BA that lack cost advantages and significant network benefits enjoyed by mid-point carriers by reason of their geographical location," it noted in its submission, much of which was redacted for confidentiality reasons.

However, BA issued a press release this morning assuring customers that its daily BA015 flights from London (Heathrow) to Sydney and the BA016 flights from Sydney to London would continue to operate, despite the end of its joint services agreement with Qantas at the end of March.

Virgin Australia has also expressed its concerns with the deal, saying there is a "real risk" the proposed alliance will reduce competition and strengthen Qantas's dominance in domestic and international markets.

In its submission to the ACCC, Virgin questioned the public and competition benefits the airlines claim will arise from their tie-up.

Virgin says it will not oppose the deal, but it is seeking limitations, including that the alliance be approved for less than the 10-year period requested by Qantas and Emirates.

The ACCC will release a draft ruling on the deal in December.

Cartel penalty

In separate news, Emirates has agreed to a $10 million penalty payment to settle a cartel case brought against it by the ACCC.

The competition watchdog says Emirates is the 10th airline to settle proceedings for alleged price fixing of fuel and other surcharges.

"This settlement with Emirates brings the total penalties ordered in Australia against international airlines involved in the cartel to $68 million," said ACCC chairman Rod Sims in a statement.

"These are the highest penalties to have ever been ordered in an ACCC investigation."

The proceedings in the Federal Court date back to 2009, and Emirates has now conceded that it reached illegal understandings with other airlines relating to fuel and security surcharges and a customs fee on air freight carried from Indonesia to Australian and other countries between October 2001 and May 2006 - this resulted in a $7 million penalty.

The airline also admitted to trying to reach an understanding with DAS Air Cargo relating to rates for air cargo from Australia, resulting in a $3 million penalty.

Emirates was also ordered to pay $500,000 towards the ACCC's legal costs.

The ACCC is continuing with a case against Singapore Airlines, Cathay Pacific, Air New Zealand, Thai Airways and Garuda Indonesia for similar allegations of cartel conduct in the air freight industry.

The case against the first four of these airlines is due to be heard in the Federal Court from October 22.